365.L Regulatory News (365)

365 Agile Group plc

("365 Agile" or the "Company")

Interim results for the six months ended 30 June 2016

365 Agile Group plc (AIM:365), announces its unaudited results for the six months ended 30 June 2016.

Background

On 21 August 2015, the Company completed the acquisition of 365 Agile Limited, a reverse takeover under the AIM Rules and changed its name to 365 Agile Group plc. At that time the Company's focus was on the sale of software to provide field based workers access to traditional back office systems on smart phones or tablets. Additionally, through its Wireless Things Limited subsidiary, the Group intended to exploit opportunities more widely in the Internet of Things ("IoT") sector, and to that end in November 2015, the Company acquired Easytherm Limited, a smart internet based heating and hot water controller which was complementary to 365 Agile's range of solutions.

In April 2016, the Company announced the departure of the Chief Executive Officer and a new licence agreement with Castleton Technology plc ("Castleton") for the provision of 365 Agile's software solutions to the social housing sector on an exclusive basis (the "Licence Agreement"). The Licence Agreement guarantees 365 Agile minimum payments totalling at least £1.8 million over a 3-year period. In addition, certain staff transferred from 365 Agile to Castleton.

On 22 August 2016, the Company announced that, following a reassessment of its strategy to develop a meaningful business in the IoT space, the board did not believe the continued investment of the income from the Licence Agreement into the Group's Nottingham based operations, trading under the Wireless Things name, would result in Wireless Things becoming core to the Group's future plans. This was formally confirmed on 26 August 2016 and accordingly this business has been closed and all staff were made redundant. In addition, the Board took the strategic decision that it would not invest further in the technology acquired from Easytherm Limited.

 Current position

Following the closure of Wireless Things, the Company is now deemed to be an "AIM Rule 15 cash shell" and has six months to make an acquisition or acquisitions which constitute a reverse takeover under Rule 14 of the AIM Rules or otherwise seek readmission as an investing company with the attendant requirement to raise at least £6 million on or immediately before such readmission.

The Company continues to own the intellectual property to the 365 Agile suite of software solutions. The income from the Licence Agreement covers the Company's day-to-day costs but is unlikely to be sufficient to fund any material acquisitions.

Financial Results

Predominantly as a result of the licence agreement with Castleton, revenue for the six months to 30 June 2016 was £2.0 million (2015: £0.9 million). This licence is a perpetual licence, meaning the discounted net present value of the full minimum payment is recognised up front. Accordingly, £1.7 million is included in income in the period in respect of this agreement.

As detailed above, following the granting of the Licence Agreement and the subsequent strategic review, the decision was taken to close the Group's Nottingham operations and to cease further investment in the Easytherm technology. Consequently, the Board considers the assets held by the company to be impaired as at 30 June 2016 and the assets have therefore been stated at their estimated recoverable amounts at the end of the period, with the result that an impairment charge of £4.3 million (2015: £nil) has been recognised within administrative expenses in profit or loss. Further details are given in Note 3 to the interim financial statements. The resultant loss before taxation for the period was £3.2 million (2015: profit of £0.1 million). Before impairment charges, the adjusted EBITDA* for the period was £1.2 million (2015: £0.4 million).

Funding

The Company has £335,000 5% loan notes outstanding which were issued at the time of the Easytherm acquisition and which are due for repayment on 23 November 2016. The cash receipts from the Licence Agreement are spread over 3 years and will not provide sufficient funds to repay these loan notes in full on their due date. The board anticipates raising additional funding to redeem the outstanding loan notes at the same time as completing a qualifying acquisition under AIM Rule 14. Should a qualifying acquisition not complete before the loan notes become due, the board has made appropriate short term arrangements to fund their repayment.

Outlook

We are continuing to evaluate potential acquisition targets in the technology sector, and look forward to updating shareholders in due course.

* Total result for the year from continuing operations before net finance costs, tax, depreciation, amortisation, exceptional costs and share-based payment charges

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

Contacts:

Unaudited interim consolidated statement of comprehensive income

for the six months ended 30 June 2016

(1) Total result for the year from continuing operations before net finance costs, tax, depreciation, amortisation, exceptional costs and share-based payment charges

Unaudited interim consolidated balance sheet

as at 30 June 2016

Unaudited interim consolidated statement of changes in equity

for the six months ended 30 June 2016

Called up share capital

Called up share capital represents the nominal value of ordinary shares in issue.

Share premium account

The share premium account represents the excess over nominal value of the fair value of consideration for equity shares, net of expenses of the share issue.

Capital redemption reserve

The capital redemption reserve includes amounts transferred to this reserve when shares are purchased and cancelled immediately.

Reverse acquisition reserve

The reverse acquisition reserve represents the difference between the parent's capital and the acquired Group's capital.

Merger relief reserve

Merger relief reserve represents the premium arising on shares issued as part or full consideration for acquisitions, where advantage has been taken of the provisions of section 612 of the Companies Act 2006.

Equity reserve

The equity reserve is a reserve to recognise those amounts in equity in respect of share-based payments as follows:

Firstly, on 31 July 2015, in acknowledgement of professional services provided as the Group's corporate finance adviser, warrants over 5% of the Company's current and future issued share capital were issued to MXC Capital Guernsey Limited ('MXC'). At 30 June 2016, MXC held 945,703 share warrants in the Company. The fair value of the warrants is calculated using a two-tiered Black-Scholes option pricing model together with an empirical model, adjusted by a probability weighting to take the likely achievement of performance criteria into account.

Secondly, in September 2015, an employee share scheme was implemented for certain members of staff. The fair value of awards under the scheme have been calculated using a two-tiered Black-Scholes option pricing model together with an empirical model, adjusted by a probability weighting to take the likely achievement of performance criteria into account. The staff who received awards under this scheme are no longer employed within the Group and therefore the charge recognised in the year to 31 December 2015 has been reversed in the current period.

Accumulated (loss)/profit

Accumulated (loss)/profit represents (losses) and profits incurred. Unaudited interim consolidated statement of cash flows

for the six months ended 30 June 2016

Notes to the consolidated unaudited interim financial statements

1. Basis of preparation

These interim financial statements, which are unaudited, consolidate the results of 365 Agile Group plc ("365 Agile", the "Company" or the "Parent") and its subsidiary undertakings (the "Group") up to 30 June 2016.

The Company is a public limited liability company incorporated and domiciled in England. The address of its registered office is 365 Agile Group plc, 100 Fetter Lane, London, EC1A 4BN. The Company is listed on the AIM market of the London Stock Exchange.

365 Agile and its subsidiaries have not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed companies, in the preparation of this half-yearly financial report. This condensed, consolidated interim financial information for the six months ended 30 June 2016 does not comply, therefore with all the requirements of IAS 34, 'Interim financial reporting' as adopted by the European Union. The consolidated interim financial information should be read in conjunction with the annual financial statements of 365 Agile for the year ended 31 December 2015, which have been prepared in accordance with IFRS as adopted by the European Union.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015 were approved by the Board of directors on 5 June 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498 (2) or (3) of the Companies Act 2006.

Accounting policies 

The accounting policies used in the preparation of the financial information for the six months ended 30 June 2016 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union and are consistent with those which will be adopted in the annual statutory financial statements for the year ended 31 December 2016.

While the financial information included has been prepared in accordance with the recognition and measurement criteria of IFRS, as adopted by the European Union (EU), these financial statements do not contain sufficient information to comply with IFRSs.

Going concern

These interim financial statements are prepared on a going concern basis as the directors have satisfied themselves that, at the time of approving these interim financial statements, the Group has access to adequate resources to continue in operational existence for at least the next twelve months.

Basis of consolidation

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to reflect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

The Group applies the acquisition method to account for business combinations where the transaction meets the criteria specified within IFRS 3. The consideration transferred for the acquisition of a subsidiary is the total of the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

Acquisition-related costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In August 2015, 365 Agile Group plc acquired, via a share for share exchange, the entire share capital of 365 Agile Limited. The exchange did not meet the definition of a business combination under IFRS 3. Although not a business combination, IFRS 3 requires the preparation of consolidated financial statements using reverse acquisition methodology.

Although the consolidated financial information has been issued in the name of the legal parent, 365 Agile Group plc, it represents in substance the continuation of the financial information of the legal subsidiary, 365 Agile Limited.

The assets and liabilities of the legal subsidiary, 365 Agile Limited, are recognised and measured in the Group financial statements at the pre-transaction carrying amounts, without restatement of fair value. The retained earnings and other equity balances of 365 Agile Group plc immediately before the transaction and the results of the period from 1 January 2015 to the date of the transaction are those of 365 Agile Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, 365 Agile Group plc, including equity instruments issued in order to effect the transaction. Comparative numbers presented in the financial statements are the accounts of 365 Agile Limited for the period ended 30 June 2015.

Impairment of assets

Goodwill is not subject to amortisation and is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. As at the acquisition date any goodwill acquired is allocated to each of the cash generating units expected to benefit from the business combination's synergies. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. When the recoverable amount of the cash generating unit is less than the carrying amount, including goodwill, an impairment loss is recognised in profit or loss.

Other intangible assets and property, plant and equipment are subject to amortisation and depreciation and are reviewed for impairment whenever events or changes in circumstances indicate the carrying values may not be recoverable. In addition, the carrying value of capitalised development expenditure is reviewed for impairment annually. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amount.

The recoverable amount of intangible assets and property, plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined by the cash generating unit to which the asset belongs. Fair value less costs to sell is, where known, based on actual sales price net of costs incurred in completing the disposal.

Non-financial assets (other than goodwill) that were impaired in previous periods are reviewed annually to assess whether the impairment is still relevant.

As detailed earlier, the Board has carried out a strategic review of the business following the departure of the Chief Executive and the entry into the licence agreement with Castleton Technology plc. That review, which concluded post-period end, determined that rest of the technology within the business was not core to its operations and a decision was taken to close the Nottingham operations and cease investment in the technology acquired from Easytherm Limited last year. Consequently, the Board considers the assets held by the company to be impaired as at 30 June 2016 and the assets have therefore been stated at their estimated recoverable amounts at the end of the period. These impairment charges, which are detailed in note 3, are included within administrative expenses in the profit or loss.

Exceptional items 

Items which are material either because of their size or their nature, and which are non-recurring, are highlighted separately on the face of the income statement. The separate reporting of exceptional items helps provide a better picture of the Company's underlying performance. Items which may be included within the exceptional category include:

· the actual and deemed costs of listing arising from the reverse acquisition;

· spend on the integration of significant acquisitions and other major restructuring programmes;

· significant goodwill or other asset impairments; and

· other particularly significant or unusual items.

Spend on integration is incurred by the Group when integrating one trading business into another. The types of costs include employment related costs of staff made redundant as a consequence of integration, due diligence costs, legal and third party advisor fees and rebranding costs.

Exceptional items are excluded from the headline profit measures used by the Group and are highlighted separately in the income statement as management believe that they need to be considered separately to gain an understanding of the underlying profitability of the trading businesses. For further detail refer to note 2.

2. Exceptional costs

In accordance with the Group's policy in respect of exceptional costs the following charges were incurred for the period:

3. Impairment of assets

As detailed in note 1, the Group has incurred the following impairment charges:

4. Earnings per share

Basic loss per share and diluted loss per share are detailed below. Adjusted EBITDA* has been shown on the grounds that it is a common metric used by the market in monitoring similar businesses.

The weighted number of shares and the loss for the period for the purposes of calculating the fully diluted earnings per share are the same as the basic loss per share calculation. This is because the outstanding share options and warrants would have the effect of reducing the loss per ordinary share and would, therefore, not be dilutive under the terms of IAS 33.

* Total result for the year from continuing operations before net finance costs, tax, depreciation, amortisation, exceptional costs and share-based payment charges.